FTX Founder’s Fraud Case: Government Witness Faces Cross-Examination
The trial against FTX founder Sam Bankman-Fried continued in Manhattan, with Caroline Ellison, the government’s key witness, taking the stand for cross-examination. Ellison, who was the CEO of Bankman-Fried’s hedge fund, Alameda Research, pleaded guilty to multiple charges in December and has been cooperating with the prosecution’s case against him.
During cross-examination, Ellison faced aggressive questioning from Bankman-Fried’s lawyer. However, Judge Kaplan appeared annoyed at the attorney’s repeated requests for sidebars. Throughout her testimony, Ellison avoided eye contact with the defendant but observed that Bankman-Fried often appeared stunned or focused on his laptop.
Alameda Research and Handling of Business
Ellison testified that she and Sam Trabucco began handling Alameda’s day-to-day business before officially taking over. By 2021, Bankman-Fried had largely stopped coming into the office and left more responsibilities to Ellison. She also revealed that attempts to hire people to oversee Alameda’s accounting had failed, leading her to take on the role herself.
In previous testimony, Ellison admitted to using customer funds from FTX to pay off Alameda’s loans at Bankman-Fried’s suggestion. She also mentioned that Bankman-Fried had discussed adding a new co-CEO after Trabucco left, but she resisted the idea.
Considered Resigning and Management Issues
Ellison shared that she had considered resigning from Alameda multiple times between 2019 and November 2022. In one of her Google Docs, she listed “management” as a limiting factor in scaling Alameda’s success. She expressed dissatisfaction with both her and Trabucco’s performance and their focus on maintaining the status quo rather than addressing problems.
Another topic in her Google Doc was “hedging.” Ellison admitted to being skeptical about further hedging Alameda’s positions and not taking any action. However, in September 2022, the firm did end up selling some bitcoin.
Hot Take: Cross-Examination Reveals Tensions and Management Challenges
The cross-examination of Caroline Ellison in the fraud case against FTX founder Sam Bankman-Fried shed light on tensions and management challenges within Alameda Research. Ellison’s testimony highlighted Bankman-Fried’s decreasing involvement in the company’s operations and her role in overseeing accounting matters.
Furthermore, Ellison admitted to using customer funds for Alameda’s benefit, allegedly at Bankman-Fried’s suggestion. The testimony also revealed Ellison’s consideration of resigning due to perceived management issues within the firm.
This cross-examination underscores the complex dynamics and decision-making processes that contributed to the events leading up to Alameda Research’s collapse. As the trial continues, further insights into these challenges are likely to emerge, offering a deeper understanding of the case against Bankman-Fried.
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